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Representative Office

The first way for a foreign company can establish itself in China, is through the establishment of a Representative Office (RO).

The ODM Group set up a Rep office in Shanghai in
2008. It is not a separate legal entity but is considered to be part of
its parent company, in this case our Hong Kong headquarters.

It is the most basic form of foreign investment and can be very
useful, and in some cases even necessary, for most administrative
decisions concerning the establishment of a business.

For companies who have complimentary business to the ODMgroup we
are able to form a less formal joint venture whereby our
clients/partners can avail of our infrastructure to employ or base a few
key staff in China. This simplifies the administrative tasks and
expensive set up costs.

Setting up an office in China means renting of office space in a
dedicated Rep. office compliant building, the employment of Chinese
personnel, the opening of bank accounts in name of the company, etc.
The advantage of establishing with The ODM Group can
be found in its inexpensiveness (There is no obligation to bring in any
type of capital), the simplicity of the procedure as well as in its
short time frame for implementing.

The ODM Group will act as a business liaison
between the parent company and local companies. It often conducts market
research, takes care of product promotion, establishes contacts with
prospective customers or partners, makes travel arrangements for parent
company representatives coming to China and conducts other non-profit
making business activities.

Want to set up your China Representative Office on your own?

Setting up a representative office in China is considered as one of
the most popular and low-cost solutions that allow foreign investors to
explore the business opportunities in China. A representative office
can carry out certain "in-direct operation" activities and their scopes
will be limited to:A) Market research; B) Quality checking on purchasing;

C) Administration on sales between China and parent company

There are a lot of hidden costs for seting up Representative Office
in China such as changing the Chief operations (RMB 10,000), changing
office location (RMB 20,000). Hidden charges should be well studied and
understood before deciding which option to take. Depending on your
trade, city where operations are set up etc... different Govt taxes will
be applied to operations.

Choosing The ODM Group as your buying office is simple and hassle-free. The ODM Group
can provide our services such as documentation to the China
Authorities, staffs, rental of office spaces in China and production.

Services

Documentations needed for submission including:

An introduction to the foreign company and its business activities in China

The name, address, purpose, duration as well as business scope of
the RO (It is very important that the business scope is filled in
correctly because it will be stated in the Registration Certificate for
the Representative Office. And a RO can only engage in business
activities that are within the business scope as set forth in the
Registration Certificate)

The name of the chief representative

A list of the documents being submitted

Application form for the employees of a RO. This form should contain
the basic information of the employees like their names, nationalities,
contact details and positions in the RO

The appointment letter for the chief representative. This letter
must be printed on the letterhead paper of the company and has to be
signed by an authorized representative of the company. It should clearly
state the name of the person who will become chief representative of
the RO

Resumes (These have to be signed by the person in question),
photocopies of the passports as well as passport size photos of all the
representatives, including the chief representative

Bank creditworthiness letter. This letter, printed on the letterhead
paper of the bank, has to be issued by a foreign bank in the area where
the foreign company is located and should be signed by authorized
officials of the bank. It is needed to show that the applicant has
financial and credit standing. The letter should contain the following
information:

The name of the foreign company

The normal deposit amount of the average daily balance for a period of six months

A short review of the creditworthiness of the foreign company

A signed office lease agreement or a letter of intent of lease (It
is important to remember that a landlord of an office or a building
needs a special permission to rent commercial property to foreigners. So
always make sure that he has that permission. You need an official
letter from your landlord stating either that he has permission to rent
commercial property to foreigners or that the building in which the
property is located is itself certified by the local public security
bureau as suitable for ROs registrations, a so-called grade A building)

* Statutory documents of the parent company issued by authorities of
the country of origin, e.g. a certificate of incorporation or a
business license.

Representative Office Taxes Need To Know

You are free of Tax if you conduct only the following activities:

a) Market research

b) Information collection

c) Business liaison (No income generated)

However, ANY commissions, bonus or fees charged on behalf of the head office shall be taxed

These taxes applies to you if you are not free of tax:

a)Corporate income tax

b)Business tax

c)Individual income tax

d)Stamp duty

e)Any other taxes related to foreign companies

Payment Methods

(1) Actual Profit Method

Should clearly record revenue and expenses

Tax filing should be done as if it is a business enterprise(e.g. Law Firm, Accounting Firm)

(2) Expenses Gross-up Method

Taxed based on the expenses incurred instead of the income received

Relatively low tax risk

Mostly tax on RO of foreign enterprises

(3) Actual Income Method

Used if cannot be classified as (1) or (2) or tax free office

Should pay taxes if office has revenue

Otherwise, a report describing all the activities during the year needs to be sent to the local tax authority

(4) Tax Free Method

RO established
by foreign governments, international organizations, not-for-profit
organizations, can apply for tax
free method by submitting application to state tax authority

Yet the application process maybe cumbersome and sufficient documents should be filed properly here shall be NO business tax and income tax for the representative office.

Things to note

* Your
representative office should determine the method in accordance with the
business nature of your headquaters and practical situation.

* Any Penalities and
overdue fines Paid by RO can be excluded in the expenses when
calculating income tax under expense gross-up method

* Rep offices shall
calculate income tax based on actual expenses. *Interest revenue shall
not offset thee expenses of the current period

* Payment Method Tax Rule

Paying Individual income taxes for all his/her global income

- FULL TIME CHIEF REP WITHOUT ANY OTHER JOB TITLES

Paying Individual income tax for his/her China-sourced income during his/her actual working period in China